If a Bombs Away franchisee is not in compliance with the System, what is the consequence regarding audit costs?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
Bombs Away Franchising may examine and audit all books and records related to the Business, and supporting documentation, at any reasonable time.
Bombs Away Franchising may conduct the audit at the Location and/or require Franchisee to deliver copies of
books, records and supporting documentation to a location designated by Bombs Away Franchising. Franchisee shall also reimburse Bombs Away Franchising for all costs and expenses of the examination or audit if (i) Bombs Away Franchising conducted the audit because Franchisee failed to submit required reports or was otherwise not in compliance with the System, or (ii) the audit reveals that Franchisee understated Gross Sales by 3% or more for any month.
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, a franchisee may be responsible for reimbursing Bombs Away for all costs and expenses associated with an audit if the audit was conducted because the franchisee failed to submit required reports or was otherwise not in compliance with the Bombs Away system.
This means that if a Bombs Away franchisee fails to adhere to the standards and procedures outlined in the franchise agreement or the operations manual, resulting in an audit, they will have to cover the expenses Bombs Away incurs for conducting that audit. This includes not only the direct costs of the audit itself, such as auditor fees, but also any related expenses Bombs Away incurs.
This policy incentivizes Bombs Away franchisees to maintain compliance with all system standards and reporting requirements. By holding franchisees financially accountable for audits triggered by their non-compliance, Bombs Away aims to ensure that franchisees take their obligations seriously and adhere to the established operational guidelines. This also protects Bombs Away from bearing the financial burden of investigating and rectifying issues caused by non-compliant franchisees.
In addition to non-compliance, the franchisee will also be responsible for reimbursing Bombs Away for all audit costs and expenses if the audit reveals that the franchisee understated Gross Sales by 3% or more for any month.